ICO Regulations Round-Up: Fundraising Law, Jeju Island, Self-Directed IRAs
In recent news pertaining to initial coin offerings (ICO) regulations, an EU report has advocated the regulation of ICOs according to crowdfunding legislation, the governor of Korea’s Jeju Island wants his jurisdiction to become a special economic zone regarding cryptocurrencies and blockchain, and the U.S. SEC has warned consumers regarding the risks of self-directed Individual Retirement Accounts that offer exposure to ICOs and cryptocurrencies.
EU Report Advocates Incorporating ICOs into Fundraising Laws
The European Parliament’s Committee on Economic and Monetary Affairs has published a draft report proposing that initial coin offerings become regulated under crowdfunding legislation.
The report states: “This Regulation gives the opportunity to ICOs that want to prove their legitimacy to comply with the requirements of this regulation. Whilst this regulation may not provide the solution for regulating the ICO market, it takes a much-needed step towards imposing standards and protections in place for what is an excellent funding stream for tech start-ups. […] Crowdfunding service providers that wish to offer an ICO through their platform, should comply with specific additional requirements under this Regulation. However, private placements, ICOs raising in excess of 8,000,000 [euros] or ICOs that do not use a counterparty do not fall within the scope of those requirements.”
The report asserted that “at present initial coin offerings are operating in an unregulated space and consumers are at risk from fraudulent activity taking place in this market,” emphasizing that the regulation of ICOs would provide greater protection to investors.
Jeju Island Governor Seeks to Build ICO Hub
Won Hee-Ryong, the governor of Jeju Island, the largest island located off the coast of the Korean Peninsula, has requested that South Korea’s central government designate the island as a special economic zone for cryptocurrency and distributed ledger technology. The governor met with a number of policymakers and other high-ranking government officials on Wednesday, according to local media.
“Blockchain is an opportunity for Korea to take the lead in global internet platform [development], […] Blockchain can cut costs, provide stable transactions and essentially has the potential to become a game changer that could alter the ecosystem of the internet platform industry,” Won said. “For Korea to become a leader rather than a consumer of this new global industry, we need to quickly allow [the operation of] blockchain and cryptocurrency [firms].”
Emphasizing the need for a permissive stance regarding initial coin offerings, governor Won stated: “Entrepreneurs looking to innovate should be allowed to raise funds through cryptocurrency.”
SEC Warns of Self-Directed IRAs and ICOs
The United States Securities and Exchange Commission’s Office of Investor Education and Advocacy (OIEA) has published a report that seeks to warn investors of the potential “risks associated with self-directed Individual Retirement Accounts (self-directed IRAs)” in which initial coin offerings and cryptocurrencies are highlighted.
The report states that “Certain self-directed IRAs allow investment in so-called “digital assets,” which include crypto-currencies, coins, and tokens, such as those offered in so-called initial coin offerings (ICOs),” asserting that “Fraudsters may use the allure associated with ICOs and other digital assets to entice self-directed IRA investors with the promise of high returns. While it is possible that digital assets may provide fair and lawful investment opportunities, they may also be conducted without SEC registration or a valid exemption from registration, and may not provide complete or accurate information to aid investors in making informed decisions.“
Lori Schock, the director of the SEC’s OIEA, stated: “Now that some self-directed IRAs include digital assets — cryptocurrencies, coins and tokens, such as those offered in so-called initial coin offerings — we think it is important to alert investors about the potential risks and fraud involved with these kinds of investments that may not be registered.”
Do you think ICOs should be governed by crowdfunding legislation? Share your thoughts in the comments section below!
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